Chancellor Rachel Reeves has unveiled a £13 billion tax package affecting household incomes, despite Labour’s manifesto commitment not to increase the burden on working people. Her Budget confirmed that income tax and National Insurance thresholds will remain unchanged for a further three years, forming part of a wider £30 billion revenue plan largely impacting middle-income earners.
++ The peregrine falcon: nature’s fastest killer in the sky
In addition to the threshold freeze, the Government will raise taxes on income derived from property, dividends and savings, while also introducing a new levy on homes valued above £2 million. According to the Institute for Fiscal Studies (IFS), the measures will push overall taxation to its highest level in modern history, making the current parliament the most significant for tax increases since records began in 1970.
Speaking after the announcement, Ms Reeves declined to rule out further rises later in the parliamentary term. The Budget follows approximately £40 billion in increases last year, after which the Chancellor suggested no additional taxation would be imposed before the next general election.
The political response was swift. Several Labour backbenchers renewed calls for Ms Reeves to step down, while the Conservative leader, Kemi Badenoch, criticised the Budget as “paid for by working people”. The Liberal Democrats labelled the measures “an assault on the squeezed middle”.
++ Government moves to assure fuel security amid Lindsey refinery collapse
Complications arose prior to the Chancellor’s address when the Office for Budget Responsibility (OBR) accidentally published market-sensitive forecasts online 45 minutes early. The error drew strong condemnation from Conservative MPs, prompting an internal investigation from OBR chairman Richard Hughes, who has since apologised. Reeves confirmed she still has confidence in him.
Much of the additional revenue will be directed towards welfare spending. The Resolution Foundation warned that higher borrowing costs may still force the Government to make further cuts or increase taxation before the next election. By 2029, benefits expenditure is projected to be £16 billion higher than anticipated in the spring, with total welfare spending expected to reach £406.2 billion over the next five years.
With income tax thresholds now frozen until 2030-31, more workers are expected to enter higher tax bands as wages rise alongside inflation. The OBR estimates that more than one in four employees—around 10 million people—will be paying the higher or additional rate by the end of the period.
The Chancellor acknowledged that working households would feel the impact, saying she was asking “ordinary people to pay a little bit more”. However, she maintained that the manifesto had not been breached, arguing that Labour pledged not to raise tax rates themselves rather than thresholds.
That position has been challenged across the political spectrum. The IFS stated that the freeze constitutes a breach of Labour’s tax promise on National Insurance, while Conservative shadow chancellor Sir Mel Stride described Ms Reeves’s stance as “untenable”. Reform UK leader Nigel Farage argued that the manifesto has been broken “in spirit, if not literally”, warning that many workers will see their taxes rise significantly if inflation remains persistent.
Some Labour MPs have also criticised the move. Graham Stringer, representing Blackley and Middleton South, said the Chancellor had “lost all credibility” and questioned her future in the role. Another Labour MP, speaking anonymously, similarly argued that the manifesto commitments had been undermined.
The Government insists the measures are necessary to stabilise public finances and fund social priorities, including the end of the two-child benefits cap and average household energy bill reductions of £150. Nonetheless, debate continues over whether the Budget represents responsible fiscal planning—or a political gamble that risks alienating voters Labour pledged to protect.
